Dabur India on Tuesday became the latest entrant to the steadily expanding list of companies receiving tax notices, with a GST demand of over Rs 320 crore, a charge that the consumer goods company said it will challenge before the relevant authorities. Over the last few months, companies in sectors ranging from fast-moving consumer goods to automobiles to mattresses makers and insurance companies have received a spate of show cause-cum-demand notices from the Goods and Services Tax (GST) authorities for issues relating to “short payment” of taxes, “wrongful availment” of credit and mismatch of details in their returns dating back to 2017-18.
Insurance companies such as LIC, Bajaj Allianz, ICICI Prudential, ICICI Lombard, Star Health and Allied Insurance along with other companies such as Maruti Suzuki, Akzo Nobel, Sheela Foam are among those that have received GST show cause notices in the last few months. This is in addition to the notices being sent to various online gaming companies and casinos for alleged underpayment of GST.
Experts said most of these notices have been sent as the time limitation period of three years for sending notices for financial year 2017-18 was coming to an end this fiscal. The limitation period begins after the filing of annual returns for the year to which the demand is related. Deadlines for filing annual returns had got repeatedly extended during the initial GST implementation phase and later during the COVID-19 pandemic, hence, the limitation period for 2017-18 came to an end in September this year. GST authorities have sent out a spate of notices before this deadline for the year 2017-18, which was the first year of the indirect tax regime after its rollout in July 2017.
“With approaching normal period of limitation for FY2017-18, there was a general expectation of notices being issued on the matter. Industry has been evaluating the said ruling on their specific facts and taking an appropriate view also keeping in mind that a similar matter is pending disposal at Supreme Court,” Abhishek Jain, Indirect Tax Head and Partner, KPMG said.
Also, as there were teething troubles in the initial period of implementation of the GST, many such notices have risen out of mismatch between GSTR-1 and GSTR-3B, the returns reflecting sales and the summary of all transactions including GST paid and input tax credit availed, respectively. “For cases pertaining to 2017-18 and 2018-19, authorities are listening to responses by companies. However, if there are repeated occurrences, then they are nudging for a payment of the tax demand and the penalty,” another expert, who did not wish to be named, said.
Service sector companies especially seem to be facing the brunt of notices from various jurisdictional authorities as they have taken multiple registrations under GST, running in number from 25-30 compared with single registration in the pre-GST phase. “If a service sector company has registrations in 25 states, it has meant fighting 25 battles in 25 states,” a tax expert said.
Experts said with these spate of showcause notices now translating into further demand notices and appeals in the coming months, this essentially means start of a long legal battle for companies under GST.
Dabur India in its exchange filing on Tuesday said it will challenge the GST demand based on “strong merits by way of filing its reply/ submissions, before the relevant authorities”.
“The Company has received intimation of tax ascertained as being payable under Section 74(5) of CGST Act, 2017, wherein GST short paid / not paid amounting to Rs 3,20,60,53,069/- has been advised to be paid by the Company along with the amount of applicable interest and penalty under Section 74(5) of CGST Act, 2017, failing which show cause notice will be issued,” it said.
Earlier this month, general insurance player Bajaj Allianz General Insurance (BAGIC) had received a Rs 1,010 crore show cause-cum-demand notice from the Directorate General of GST Intelligence, Pune. In September, the DGGI had served a Rs 1,728 crore demand notice on ICICI Lombard General Insurance for non-payment of tax on certain supplies between July 2017 and March 2022. Earlier, the government had said Directorate General of GST Intelligence, Mumbai Zonal Unit initiated investigations against 16 insurance companies on the issue of availment of ineligible input tax credit.